Wire Transfer Fraud Continues to Affect Businesses

According to an alert issued by the Federal Bureau of Investigations (FBI) on May 4, 2017, the use of business email compromise (BEC) schemes to defraud businesses surged in the last half of 2016. These types of schemes typically involve cyber criminals either hacking or spoofing a supplier’s email address and then requesting a wire transfer from a business associated with the supplier to the cyber criminal’s account. Between October 2013 and December 2016, there were approximately 40,203 incidents of this type of wire transfer fraud involving more than $5.3 billion dollars. However, according to a June 14, 2016 FBI alert, only 22,143 incidents had been reported by May 2016, meaning half of the reported incidents occurred between May 2016 and December 2016.

The businesses targeted by these wire transfer scammers can range from very large corporations to relatively small business entities. For example, in late April 2017, the Wall Texas Independent School District was scammed out of more than $45,000 when the school district’s business manager received three separate spoofed emails from the superintendent asking the manager to wire funds to three separate bank accounts of three separate persons. Investigation on that incident is still ongoing.

Wire transfer fraud can also give rise to civil litigation, such as the recently filed case in the District Court for the Western District of Texas between a nut distributor— J.F. Nut Company— and a nut wholesaler— San Saba Pecan Exports. A third-party hacker broke into J.F. Nut’s email system and sent fake emails to San Saba requesting that payments for J.F. Nut’s shipments be wired to a different account. San Saba did not attempt to confirm the change and has since wired approximately $1.54 million dollars to the fraudulent account. J.F Nut has demanded payment on their shipments, and San Saba has refused, resulting in the present litigation.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.